2021
DOI: 10.22158/jbtp.v9n1p51
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Stock Return Autocorrelation and Individual Equity Option Prices

Abstract: This study demonstrates empirically the impact of stock return autocorrelation on the prices of individual equity option. The option prices are characterized by the level and slope of implied volatility curves, and the stock return autocorrelation is measured by variance ratio and first-order serial return autocorrelation. Using a large sample of U.S. stocks, we show that there is a clear link between stock return autocorrelation and individual equity option prices: a higher stock return autocorrelation leads … Show more

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